New Hanover County will be raking in money at the expense of cash strapped landlords when the new year rolls around, and there doesn’t seem to be much you can do about it this year. The old personal property tax “includes motor vehicles, boats, campers, trailers, singlewide mobile homes with wheels & axle attached, doublewide trailers with wheels and axle attached, household furnishing or appliances for someone who rented or leased a residence or apartment from you, permanent tagged trailers and airplanes.” (http://tax.nhcgov.com/services/personal-property/) is being used in an aggressive, to our knowledge, never before seen way in NC. Our guess is that this wording was recently added to their site to lend credibility to the power grab… “household furnishing or appliances for someone who rented or leased a residence or apartment from you”
The line for household furnishings and appliances is what should have landlords worried. The county will be taxing all furnishings and appliances in county rental homes. This means if you have a refrigerator in the property you are renting out, as most landlords do, you will be charged a personal property tax that is ridiculously high by their default calculation. For those sharp enough to contest this shocking disregard for reasonable treatment, the bill would likely be lowered so much as to make this process a massive budget drain rather than a benefit. The math here is simple. If the county applied reasonable values to the personal items they are taxing, they would be losing more money than they gain in man power, supplies, postage, etc. However, to offset this problem they have chosen to attribute an arbitrary massive value calculation of 10% of total property tax. Yes, that’s 10% of what they charge for your entire house. This ensures their efforts do indeed contribute to the bottom line at the expense of unaware landlords. We manage nearly 400 homes, and most likely none, but at best a few contain personal property close to 10% of the homes value.. That being a fact, one has to ask why on earth would our county default to such an unreasonable calculation?
Here is a real example we just dealt with : New Hanover County recently assessed a $16,960 tax to one landlord for a refrigerator, stove, washer and dryer. Considering the age and quality of these items, they would net approximately $700 if sold used. If these same items were purchased brand new, they would run 2K max.
Here is the current tax burden for a landlord that utilizes a basic appliance in a rental property… You’re charged sales tax on your new appliance at purchase, then taxed again for every year you own it, then taxed again when you leave that appliance behind and sell the house (excise taxes are naturally higher as a result of the appliances being included).
Most landlords are already paying the following taxes on rental properties : state income tax, federal income tax, local real property tax, sales tax when purchasing basic supplies / appliances, local excise taxes when selling, and possibly capital gains taxes. Now add in a severely inflated annual personal property tax.
This severe and unfair over-application of law in New Hanover County could be the start to other unfair laws, or over application of those currently existing, as is the case here. As we all know, new taxation is a very slippery slope. Furthermore, the county is clearly counting on busy landlords overlooking their egregious over valuations, a tactic that seems predatory at best.
Finally, many landlords are so confused by this new tax they wouldn’t know how to contest it. Take it from us as we have
been contacted by a ton of confused and furious landlords asking for help on the matter. In the example we gave above, that landlord mistakenly thought they would be required to pay taxes on a mounted microwave, mounted tv bracket, dishwasher, and a few other items. To make matters more confusing, the county seems to be actively blaming property managers for the confusion they are spreading, and offering no helpful insight to questions.. We have had several owners contact us extremely upset, and stating that the county implied it was us who had created this nightmare.
By knowing exactly what constitutes personal property, you will have the tools necessary to mount a reasonable defense. Let’s cover a few points now…
Any property fixed, or mounted to the property is not personal property and should never be considered for this tax. That means tv mounts, curtain rods, mounted microwaves, built in stoves / ovens (exclude the more common slide in), dishwashers and pretty much anything screwed or bolted to the actual home.
The other step to a successful contest is to utilize math, as opposed to esoteric or emotional defenses. Go on Craigslist and find very similar used goods for sale, and include those ads as well as the values in your contest. Then find similar new goods, and include those ads in your calculations. Itemize the items in question with used and new values in 2 columns, total them up and include a total used value, as well as new value. Multiply this by your stated tax rate and you’ll arrive at a fair range that will be very hard for the county to dispute. Make sure not to include fixtures, and don’t forget to include the actual ads!
Perhaps instead of wasting tax dollars enacting brand new unheard of taxes to collect pennies from cash strapped landlords (and huge sums from those they dupe), NHC should simply learn to manage their finances sensibly and foster an environment where their subjects have an incentive to produce rather than looking for places to flee to. Places such as every other county in NC that does not have this tax. (fyi we have found Wake County to be extremely friendly to landlords and experiencing phenomenal population growth)
Homeowners should see this is an opening salvo, and fight it as hard as they can. It’s a severe, unfair overreach and over application of a law in NC that no other county to our knowledge has attempted. If successful it will be just the start, and will likely infect other counties and laws as the tax / bad financial management virus so often does…